It has been an unfamiliar delight to wake up the past few mornings knowing that I am neither a shareholder nor depositor in Northern Rock. In the usual course of events, whenever a company goes pear-shaped my pension fund proves to be involved. Friends often ring me to ask which businesses I have shares in, to be sure to avoid them.

Yet, however pleasing it is to see City folk sweat, it is obvious that schadenfreude would be misplaced. We are all going to feel pain somewhere from the chaos in the financial markets. The feel-good factor, which has proved vastly more important than any government personality or policy in sustaining Labour in power, will be imperilled. Politics could be transformed if hard times hit the high street and housing market.

Present events seem unlikely to signal the collapse of capitalism or even a major recession, but it must surely mean a reality check on the follies of recent years, in which tycoons and ticket collectors alike have splurged far more money than they could sensibly afford on buying companies or, at the humbler end of the scale, plasma TV screens so large that newsreaders' warts show through their makeup.

A wise City editor cherishes the maxim, "Don't invest in things you don't understand". How many of those inside the soaring towers east of Temple Bar have known what they have been betting their ranches on lately, never mind the rest of us out in no man's land? Of course there are some very clever people steering the world's financial institutions. But the evidence suggests that there are also some frighteningly stupid ones.

Incomprehension makes us the City's prisoners. We know what vacuum cleaner manufacturers do, and waiters and lawyers and doctors and even ministers. We are told that the activities of the City of London now account for a frighteningly large proportion of national economic activity.

But as to what those activities are, who can tell? I have met lots of investment bankers, hedge fund managers, currency dealers. But I would struggle to describe on one side of a sheet of paper how they spend their days, beyond peering at screens. I bet you would, too.

Financial management is the new witchcraft, an art that makes many of its practitioners absurdly rich, commands the grudging respect of millions, but relies upon skills and secrets that remain opaque to all outside the Magic Circle.

Few of those who preside over the cauldrons possess social or cultural graces. In the company of City folk, I often recall some lines from Anthony Powell's novel A Buyer's Market, describing the tycoon Sir Magnus Donners at a lunch party: "On the lips of a lesser man his words would have suggested processes of thought of a banality so painful - of such profound and arid depths, in which neither humour, nor imagination, nor, indeed, any form of human understanding could be thought to play the smallest part - that I almost supposed him to be speaking ironically, or teasing his guests by acting the part of a bore in a drawing-room comedy."

Here I must search my soul, pondering how large a part is played by envy in determining the sceptical view we outsiders take of the multimillion bonus league. Of course the worm is there. In the next generation, the only social division likely to matter in Britain will be between those taking huge sums home from the City, and those earning relatively paltry amounts outside it.

A decision at the outset of one's career to become a doctor or journalist or civil servant comes close to ensuring that one can never hope to share an upper-middle class lifestyle that will be the almost exclusive prerogative of entrepreneurs, bankers, management consultants and inheritors of wealth. This has always been true in some degree, but in future there will be a near-apartheid distinction.

Whatever the outcome of current turbulence, moving money will continue to be a vastly more profitable activity than almost anything else in Britain, save playing football. Many of us can live with this state of affairs, containing our resentment, as long as those in charge appear to know what they are doing. When, however, as in the past few weeks, we see idiot lending policies generating frightening turmoil, it is impossible not to feel pretty sore towards those in charge of spell-making.

Mrs Thatcher was an ardent advocate of personal financial empowerment. She sought to enable us all to be responsible for our own affairs, to exercise discretion over our pensions and so on. Yet few people are capable of using such discretion wisely. My own pension fund statements might as well be written in Arabic for all they mean to me, except I can grasp the brute fact that my pot somehow shrank in the early months of this year, long before the summer upheavals. It is now worth only fractionally more than it was in 2001, before the then market collapse. Management fees take a fat bite every year, of course, heedless of whether the investments have prospered or not.

I expect no personal sympathy, because I am in a happy financial position compared with most of the rest of the country. But it seems reasonable to ask: if I, supposedly well able to look after myself, find it hard to make my pension fund work decently, how on earth can millions succeed, who lack my opportunities to raise hell?

The challenge for the City of London is to convince the public that, even if its workers are extravagantly rewarded for their services, what they do benefits the rest of us; that their activities are not exclusively self-serving. This will become much harder if the turmoil of recent weeks, driven by stunning banking incompetence, feeds through into the real world and starts hurting peoples' pockets, as it seems likely to do.

A hubris, a madness, has overtaken the financial world in the past two or three years, causing some of its chief practitioners to delude themselves that the old rules of prudence had gone out of the window. A vast pool of easy money has been pursuing a much smaller supply of sensible investments. Businesses have overpaid for most properties they have bought, because that was the only way to get the deals. Banks have bought a load of stuff now seen to be worthless.

This recklessness has, of course, been matched in City private lives, where Krug, yachts, Porsches and racehorses are at premiums. The big-hitters have been indifferent about how many millions, or indeed tens of millions, they paid for a country house which they wanted.

It seems premature to speculate that all this conspicuous consumption is now at an end. Neither we nor the Bank of England have any idea how bad the housing debt crisis is going to get, or what its knock-on effects will be. Most people outside the City would love to see humbled the high-rollers who have so conspicuously failed in their responsibilities. The trouble is, if this happens it seems likely that the rest of us will catch colds at least as discomforting as those afflicting the fat cats.